The Reject Shop Ltd (ASX: TRS) share price rocketed in yesterday's trade after the retailer named its new chief executive, more than 6 months after the former CEO departed.
Former Target Chief Operating Officer Andre Reich will take the reins, charged with turning the fortunes of the discount retailer after a period of underperformance.
Investors seemed to warm to the appointment, with Reject Shop shares finishing Monday up 12.5% at $2.25 from $2.00 at Friday's close. Reich will hit the ground in January and comes with some 25 years of retail experience. Most recently at Reject shop competitor Target, Reich was General Manager of Merchandise and Marketing at Kmart Australia prior to that.
Reject Shop Chairman Steven Fisher said, "Reich is recognised across the market as a high performing retailing executive with extensive experience in low price retail formats."
Mr Reich's experience will come in handy when it comes to transforming The Reject Shop. Shares in the company have fallen from highs of nearly $15 in 2016 as rent increases and falls in consumer spending take their toll. In FY19, The Reject Shop reported a full-year loss of $16.9 million.
Sales in FY19 decreased by 0.8% to $793.7 million, while comparable store sales shrunk 2.5%. Gross margin decreased 1.1% due to poor buying decisions and an increase in shrinkage. The cost of doing business increased by 1.9%, mainly due to rent and wage increases. Earnings before interest tax depreciation and amortisation were $18.2 million, a decrease of 57.6% on the previous corresponding period.
A non-cash pre-tax impairment charge of $21.9 million was announced and no full year dividend was paid due to the poor performance of the business. The board does, however, intend to return to paying dividends as soon as profitability allows.
What's the outlook for The Reject Shop?
FY20 has seen some improvement in The Reject Shop's fortunes with comparable store sales up 0.3% in the first 15 weeks. A more aggressive approach to leasing costs has been flagged, with the company having 'no hesitation' to exit leases where occupancy costs do not meet rent-to-sales criteria. This may result in store closures or relocations to more affordable premises.
Christmas is a critical time for The Reject Shop. The company's strategy is focused on delivering a refreshed range to appeal to a younger demographic and meet the needs of Australian families. The aim is to expand the core customer reach to attract new customers and increase the number of items customers are buying.
